How have development banks performed in the first quarter of FY 76/77? One bank leads in almost all major indicators

Tue, Nov 26, 2019 3:23 PM on Exclusive, Financial Analysis,

Development Banks are class ‘B’ BFI’s approved by the NRB to carry out banking business around the country. These development banks are classified into national level, operating in 4-10 districts and regional level based in 1-3 districts it is currently functioning in. As per the regulation of the NRB minimum paid up capital requirement for national level development banks is Rs.2.50 Arba while that of regional level is Rs.50 Crore. Similarly, minimum threshold for development banks operating in 4-10 districts is Rs.1.20 Arba.

As banks have been on a spree to merge and reduce the number of BFIs in the country, some commercial banks have acquired development banks while two or more development banks have merged as well. NMB Bank and Prime Commercial Bank trading resumed recently after successful merger with Om Development Bank and Kankai Bikas Bank Limited. Similarly, Purnima Bikas Bank and Bhargava Bikas Bank merged with Shine Resunga Development Bank to upgrade to National Level Development Bank and Nepal Community Development Bank received letter of intent to merge with Tinau Mission Bikas Bank. Apart from those undergoing merger, only Karnali Development Bank has not published first quarter report.

The remaining development banks have been compared on the basis of major indicators from the first quarter report. The development banks have been segregated into two categories, national level (blue colored cells) and regional level (purple colored cells).

Deposits and Loans

In terms of both loans and deposits, Muktinath Bikas Bank leads the industry with both loans and deposits above Rs.40 Arba. The deposits till the end of first quarter stood at Rs.44.35 Arba while the loan worth Rs.41.26 Arba were provided. Among regional banks, Tinau Mission Bikas Bank stood ahead with deposits of Rs.10.67 Arba and loans of Rs.8.78 Arba.

Net Interest Income

The net interest income is the main source of income for the banks. It is calculated by deducting interest paid on deposits from interest received on borrowings. MNBBL has posted the highest net interest income of Rs.52.36 Crore by the end of the first quarter. EDBL stood ahead in among regional level development banks with Rs.11.32 Crore as net interest income. Sahara Bikas Bank posted the lowest net interest income in the industry at Rs.1 Crore.

Net Profits

While MNBBL also posted the highest profit in the industry at Rs.22.87 Crore, some regional level banks have performed better than Kamana Sewa Bikas Bank in the first quarter of FY 76/77. Only seven development banks were able to post net profit above Rs.10 Crore, similarly, four regional level development banks posted profits below Rs.1 Crore. The lowest profit in the industry was posted by Sahara Bikas Bank.

EPS, Net Worth per Share and PE Ratio

The earnings per share has been annualized and PE ratio derived on the basis of annualized EPS. Highest EPS was posted by MNBBL at Rs.29.86 followed by Excel Development Bank at Rs.28.19. Two banks with lowest EPS in the industry were Kamana Sewa Bikas Bank and Green Development Bank.

EDBL posted the highest net worth per share at Rs.257.62 followed by Lumbini Bikas bank at Rs.165.41. While GRDBL’s report was silent about the net worth per share and the PE Ratio, the lowest net worth per share stood at Rs.106.56 posted by Corporate Development Bank.

The lowest PE ratio in the industry stood at 8.60 times posted by Garima Bikas Bank while the highest stood at 47.95 times posted by Kamana Sewa Bikas Bank, both national level development banks. The PE ratio of regional level development bank varied between 10.14 times and 38.16 times by the end of the first quarter.